Can Innovation Save the Postal Service?

WASHINGTON - As the U.S. Postal Service continues its financial freefall and lawmakers consider legislation to free the agency of costly labor obligations, another debate is percolating about whether and how the organization can reinvent itself as a sustainable entity in the digital age.

While the Postal Service continues to rake in tens of billions of dollars in annual revenues and has more than half a million career workers on its payroll, it is saddled with enormous costs in the form of federally mandated employee benefit payments.

"It's probably the richest broke company in America," Frederic Rolando, president of the National Association of Postal Letter Carriers, said in a panel discussion this week at the PostalVision 2020 conference. "If private companies were required to do what the Postal Service is required to do, believe me, most of them wouldn't be in business."

But Rolando argued that the problems facing the Postal Service are structural, too deeply ingrained simply to be resolved by cutting benefit costs and reductions in the workforce and infrastructure. According to Rolando, the statutory requirement to prefund retiree health benefits, while a significant financial burden that the Postal Service is appealing to Congress to ease, is unrelated to the larger problem of a business model that has failed to keep up with changing consumer demands.

"The mindset has to change because of the need to replace revenue," he said. "You hear all the talk about the prefunding and so forth, but anyone who thinks that solving the prefunding issue is going to resolve the Postal Service's issues isn't completely thinking about this."

Rolando and other critics have charged that the Postal Service has been stubbornly resistant to innovation. Gene DelPolito, the president of the Association of Postal Commerce, suggested that the agency has been complacent in the face of a staggering drop-off in the volume of First Class mail since its peak in 2006.

"You must understand that the Postal Service comes from the history where it had business flowing out of its pockets left and right. It had no compelling reason to want to look at doing anything differently than it had ever done in the past. And you've got an entire workforce and management structure that grew up in that culture. Now it is experiencing something totally new," he said.

The Postal Service itself has advanced numerous ideas for boosting revenues and cutting costs, including an expansion of delivery options for the growing parcel business, the shift to five-day weekly delivery and cuts to its workforce and network of facilities

Critics, Rolando and DelPolito among them, charge that those proposals don't go nearly far enough to address the systemic decline in mailing volumes, and that they lack the vision needed to open innovative new business lines to sustain the agency.

Postal Service officials often talk of the dire need for lawmakers to move on legislation that would relax the prefunding requirement for retirees' health benefits and other costs, but DelPolito suggested that if the agency operated under a more innovative culture, it could take numerous steps to address the revenue shortfall independent of Congress.

"I think they have an enormous amount of flexibility, but I can tell you from first-hand experience, more good ideas die within the walls of L'Enfant Plaza than you will ever know about," he said, referring to the office complex where the Postal Service maintains its headquarters. "I don't think you need to go through enormous structural changes in the law in order to be able to let the Postal Service be able to move forward."

The PostalVision conference was organized around the theme of reimagining the Postal Service as a platform. That concept argues that the agency, with an unmatched delivery footprint, a vast infrastructure and significant intellectual property, sits atop a reservoir of assets that could offer significant value - and generate revenue - if they were made available to a broader group of public and private entities. As a starting point, that would entail deeper partnerships with businesses, such as those the Postal Service already maintains with FedEx and UPS.

But the notion of completely privatizing the Postal Service, as some outliers in the debate have urged, is a fantasy, argued Jim Campbell, a legal consultant who specializes in postal regulatory issues.

"It does seem to me that there is too much emphasis on the dichotomy between the public sector and the private sector. Because in reality it's not that simple," Campbell said. "It seems to me no matter what you're talking about, you're talking about a public-private partnership of some sort."

Privatization, to a degree rather than as an absolute, is critical to the Postal Service's survival, he said. That could entail an overhaul of the agency's governance structure, including a relaxing of the federal mandates on issues such as the universal service obligation and, potentially, outsourcing business processes that are currently handled in-house.

"In the postal world it seems to me perfectly possible to imagine that private companies would do more of the collecting, sorting, transmission," Campbell said. "But there is no way to get away from the fact that you're still going to have some kind of public-private partnership."

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .